Members of OPEC+ met this week to discuss production levels in light of the expectations for slower than expected crude oil demand growth. In reference to the economic recovery following worldwide shutdowns, the International Energy Agency (IEA) wrote in it’s outlook, “The recovery in the second half of 2020 is projected to be gradual, as economies come out of containment and activity levels rise. Nonetheless, demand is not expected to reach pre-crisis levels before the end of the year, with December demand projected to be down 2.7 mb/d from December 2019 levels.”
IEA this week reported compliance with production limits among OPEC+ members around 97% in August after having rated July compliance at 85%. Some members had overproduced in violation of OPEC+’s mandate and those nations are expected to compensate by producing less in the coming months, and, indeed it has been noted that Iraq and Nigeria have cut crude production, resulting in the higher August compliance number.
In recent years past, OPEC+ output has averaged around 30 million barrels per day. After enacting mandatory cuts among members, 2020’s OPEC+ production has fallen to around 20 million barrels per day. This week’s meeting among member nations was aimed at reminding member nations of the expected curtailments and to require those nations which had not overproduced earlier this year compensate for the overhang by producing less. That goal seems to have been achieved and was already enacted through August by some.
No new information was released following the confab other than the expression of the organization’s intent to keep supply and demand balances in check.
“Based on the average projections of various institutions, including OPEC, EIA and the IEA, it is estimated that the world will reach about 97% of pre-pandemic oil demand during the fourth quarter - which is a big recovery from the huge falls in April and May,” said Saudi Energy Minister Prince Abdulaziz bin Salman, according to Reuters.
According to the U.S. Energy Information Administration, in the week ended September 11, U.S. crude oil production gained 900,000 barrels per day on average to 10.900 million barrels per day, down significantly from the same week last year of 12.425 million barrels per day.